2018 (10) TMI 1301 - HC - Income Tax

High Court considers tax component in electricity sale for relief under Sections 80IA/80IB

The High Court of Madras allowed the appeal in favor of the assessee, holding that components of price for the sale of electricity fixed based on tax ... Computation of deduction 80IA/80IB - Tribunal held that components of price for sale of electricity fixed on the basis of tax liability should not be taken as part of the transfer price of coal and sale price of electricity in computing the relief - Held that:- Issue to be decided in favour of the assessee, by judgement of M/S. NEYVELI LIGNITE CORPORATION LIMITED VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE  IV (4) CHENNAI [2013 (1) TMI 136 - MADRAS HIGH COURT] which says:- “Where under the agreement the tax component is part of the sale of electricity from the Thermal Power Generating Stations and the mere fact that a component of the tariff makes a reference to the tax liability with reference to income streams, does not make such a component as not income to be excluded in considering the relief under Section 80IA/80IB.” - Decided against revenue Issues:Interpretation of tax liability components in the sale of electricity for computing relief under Section 80IA/80IB.Analysis:The High Court of Madras heard an appeal filed by the assessee against the order of the Income Tax Appellate Tribunal for the Assessment Year 2002-03. The substantial question of law in this appeal was whether the Tribunal was correct in holding that components of price for the sale of electricity fixed based on tax liability should not be considered part of the transfer price of coal and sale price of electricity when computing relief under Section 80IA/80IB. The appeal was admitted and tagged with another case previously decided in favor of the assessee. The previous case established that the tax component in the sale of electricity should not be excluded when considering relief under Section 80IA/80IB, even if it makes a reference to tax liability with respect to income streams. The legal position was not disputed by the Revenue's counsel. Consequently, the High Court allowed the appeal, following the decision in the assessee's earlier case and answering the substantial question of law in favor of the assessee. No costs were awarded in this judgment.